The Bear Shows Up...

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Stock Market Trends:

- ETF Positions indicated as Green are Long
ETF positions and those indicated as Red are
short positions.

- The State of the stock market is used to determine how you should trade.
A trending market can ignore support and resistance levels and maintain its
direction longer than most traders think it will.

- The BIAS is used to determine how aggressive or defensive you should be
with an ETF position. If the BIAS is Bullish but the stock market is in a Trading
state, you might enter a short trade to take advantage of a reversal off of
resistance. The BIAS tells you to exit that ETF trade on "weaker" signals than
you might otherwise trade on as the stock market is predisposed to move in
the direction of BIAS.

- At Risk is generally neutral represented by "-". When it is "Bullish" or "Bearish" it
warns of a potential change in the BIAS.

- The Moving Averages are noted as they are important signposts used by the
Chartists community in determining the relative health of the markets.

Best ETFs to buy now (current positions):

Long DIA at $161.48 as of December 19, 2013
Long QQQ at $85.99 as of December 19, 2013
Long SPY at $181.19 as of December 19, 2013

Value Portfolio:

Long SDRL at $33.90 on June 15, 2012 (Shares were put to us when options expired.
We were paid $1.10 per share when we sold those options and bought shares for
$35.00 each). We have collected dividends: March 5, 2014 $0.98, December 3,
2013 $0.95, September 5, 2013 $0.91, June 5, 2013 $0.88, $1.70 Dec 4, 2012,
$0.84 Sep 4, 2012. Total = $5.28 in dividend payments.
Short FXE at $124.19 on August 24, 2012
Long UUP at $22.43 on August 24, 2012
Short FXE at $134.48 on October 4, 2013
Long SDRL at $35.43 on Feb 18, 2014
Long SDRL at $33.50 on March 21, 2014 (Shares were put to us when options expired.
We were paid $1.50 per share when we sold those options and bought the shares
for $35.00 each.

Equities saw a modest gap down with a dearth of buying. Although volume was
light to below average, the direction was downward. At this time, there is
little that favors equity bulls. Longer Term Bonds (TLT 112.48 +0.45)
added a fractional gain and look to be topping here. That may be enough to
turn around the slide in equities, or it may not be. TLT remains in an uptrend
state closing above its 20-, 50-, and 200-Day Moving Averages (DMAs). Trading
volume was light with 700M shares traded on the NYSE. Trading volume
on the NASDAQ was below average with 1.821B shares traded.

There was a single economic report of interest released:

Trade Balance (Mar) came in at -$40.4B versus an expected -$40.6B

The report was released an hour before the open.

For eight sessions in a row, now, the NASDAQ has had more new lows than new
highs. So, even when the NASDAQ shows gains and otherwise shows bullish market
internals, the number of new lows continues to be greater than the number of
new highs. This is clearly a sign of weakness. The last time there were eight
or more consecutive sessions where the NASDAQ had more new lows than new highs
was in November 2012 which corresponds with the last time that the NASDAQ-100
was trading below its 200-DMA. The NASDAQ-100 struggled the entire month of
December before starting a grinding move higher that lasted the entire year
of 2013.

We are watching gold for a potential reversal in the Gold Miners Index (GDX
24.28 -0.13) posted a fractional loss. The price of Gold (GLD 125.98
-0.24) posted a modest loss. Both GDX and GLD closed below their respective
50-DMAs but GDL is now above its 200-DMA while GDX is below that respective
moving average.

Apple (AAPL 594.41 -6.55) lost more than one percent. AAPL constitutes
about 20 percent of the NASDAQ-100 and nearly five percent of the S&P-500.

Seadrill Limited (SDRL 34.94 +0.16) added about one half of one percent
to close back above its 50-DMA. It appears to be setting up to move up and
test the upper Bollinger Band. It is above its 20-DMA but below its 200-DMA.
We sold March 2014 $35.00 put contracts for $150 at the open on Feb 18th and
bought shares at $35.43. The stock is now trading ex-dividend for $0.98. The
shares were put to us at $35.00 less the $1.50 per share we were paid for the
puts, so we have an effective price of $33.50.

The U.S. dollar fell four tenths of one percent while the Euro moved the opposite
direction. The Euro is very near its high this year and the dollar just broke
to a low not seen since 2011.

The yield for the 10-year treasuries fell a basis point to close at 2.60.
The price of a barrel of crude oil was essentially unchanged rising just two
cents to close at $99.50.

The implied volatility for the S&P-500 (VIX 13.80 +0.51) soared most of
four percent but remains just below its 20-, 50, and 200-DMAs. Implied volatility
for the NASDAQ-100 (VXN 17.09 +0.31) rose two percent. It is still below its
20- and 50-DMAs but above its 200-DMA.

Market internals were bearish with decliners leading advancers 2:1 on the
NYSE and by 4:1 on the NASDAQ. Down volume led up volume 3:1 on the NYSE and
by 5:1 on the NASDAQ. The index put/call ratio fell -0.25 close at 0.71.
The equity put/call ratio rose +0.03 to close at 0.68.

Conclusion/Commentary

There was nothing bullish about equities on Tuesday. The bulls could not put
anything together and the bears became emboldened selling into the close. The
only relief for the bulls is that the downward move was on light or below average
volume. We are concerned over the performance of equities of late and will
shift to a more bearish stance by the close on Wednesday, barring a change
in the way equities are trading. Look for an intraday signal to indicate were
are closing long positions, unless something changes. In addition, we may shift
to entering short trades as well.

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